On July 1, the United Kingdom’s Bribery Act 2010 finally comes into force. National Defense’s December 2010 Ethics Corner highlighted the act’s worldwide reach. U.S. firms with U.K.-based activities appear to be covered by the act, as are firms that have significant sales in or from the United Kingdom.
To guide compliance, the nation’s Ministry of Justice in March published steps companies should take to prevent corruption. The Serious Fraud Office also released its statement on how it interprets the various Bribery Act provisions.
These two roadmaps, originally expected in January, were delayed after intense lobbying on the part of industry to address concerns. This postponed the effective date of the Bribery Act from April to July. Courts obviously will have the final say on interpretation, and much will depend on the fraud office’s prosecutorial discretion. In the advent of judicial rulings, can the documents help companies to achieve compliance?
One highly controversial aspect of the Bribery Act is its jurisdictional reach, relative to the activities of foreign companies. The “s7 Corporate Offence,” purporting to cover all entities that “carr[y] on a business” in the United Kingdom, can penalize companies for failing to prevent bribery in the first place. This obviously carries serious implications for any U.S. defense contractor who engages in the British defense sector.
The situation is arguably murkier, however, for companies selling goods into Great Britain on an infrequent basis. Perhaps heeding concerns about harm to U.K. commerce, the ministry guidance suggests that entities lacking a “demonstrable” U.K. presence may fall outside the scope of the Bribery Act. Wisdom dictates a conservative approach by firms that have any meaningful U.K.-related business, rather than relying solely on a prosecutorial discretion.
Accordingly, companies with any business nexus to the country should assume their individual activities may be subject to the act.
The act’s reach in the context of corporate hospitality has also been criticized, with some questioning whether that business entertainment trips to the Wimbledon tennis tournament would raise compliance issues.
The Bribery Act does not exempt bona fide promotional expenditure, but the ministry guidance seems clear that legitimate hospitality and promotional activities considered an established and important part of doing business are not prohibited. It must be recognized, however, that a simple act such as taking someone to dinner may constitute a bribe if the host’s intent is to influence the actions of his guest and/or the expenses are particularly lavish.
The U.S. Foreign Corrupt Practices Act is limited to dealing with bribery of foreign public officials. The Bribery Act, however, also applies equally to commercial bribery of private individuals and companies. As such, addressing this risk of improper hospitality becomes a more delicate task as compliance controls imposed will need to cover the full range of possibilities. The balance will be to design procedures that prevent any improper conduct while allowing legitimate promotional and hospitality to take place with minimal disruption.
The ministry has confirmed, in separate guidance, that a “s7 Corporate Offence” Bribery Act conviction will not result in automatic disbarment under the implementation of the European Union’s public procurement rules. Such a conviction, however, will render a company vulnerable to a decision to exclude by the public body seeking bids or proposals. How public bodies will exercise discretion in practice remains unknown.
Many will undoubtedly feel pressure and feel ethically obliged to favor exclusion. Again, for any company that could fall within the scope of the new Bribery Act, it is strongly recommended that robust internal compliance measures are put in place that minimize opportunities for improper bribes or gratuities and clearly describe disciplinary ramifications for improper conduct. For companies strongly reliant on public contracts, a Bribery Act conviction could be tantamount to a commercial death sentence.
Reasonable steps can and should be taken to prevent conduct governed by and punishable under the new act, and existing corporate anticorruption programs should be reviewed and enhanced as necessary to adequately address exposure to it. Lisa Navarro (firstname.lastname@example.org) is a senior associate in Greenberg Traurig Maher LLP’s
London Office. The views expressed are solely those of the author.